Planning For A Memorial Day Closing

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13 days
by in Personal Finance

Memorial Day ClosingsPlanning to close on your home at the end of May? Plan ahead. Memorial Day is coming and the holiday may delay your closing.

Memorial Day marks the unofficial start of summer and the 3-day Memorial Day weekend is a popular vacation time in real estate-related industries.

Real estate agents tend to take time off because fewer of their clients are actively home shopping on a holiday weekend; mortgage lenders are closed because banks don’t operate on a federal holiday; and, title agents are often away from the office because the former two groups aren’t working.

But what’s supposed to be a 3-day weekend is actually a 4.5-day one. This is because many people leaving for a Memorial Day vacation will not go to work on the Friday before the holiday, and then getting back into the “work groove” on Tuesday can be a half-day affair.

Therefore, if you’re under contract to buy a home in Charlotte , or to sell one; or if you have a refinance in progress that’s expected to close at month-end, there are some steps you should take to get pro-active with your closing. If you’re going to lose 4-and-a-half days at the end of the month, you’ll want to try to make those days up while the month is still young.

Here are 3 quick tips to speed up your closing and approval.

First, get your homeowners insurance policy picked out. Do your comparison shopping, select an insurer, and then prepay your first year of insurance, effective your closing date. Pay by check and not credit card, if possible, to avoid harming your credit score.

Provide your proof of payment to your lender immediately.

Next, if you’re using a Power of Attorney, have your documents signed by all interested parties and submit them to your lender for review. Don’t assume that your attorney’s Power of Attorney documents will be acceptable to a bank — banks require specific verbiage. If the documents are rejected, make the requested fixes and resubmit.

Banks do not compromise on Power of Attorney letters.

And, lastly, if you’re accepting gifts or using retirement funds for your downpayment, be sure to have your paperwork reviewed and on file with your lender as soon as possible. Do not wait to withdraw funds until just before closing, either. Have everything in the proper checking account at least one week in advance, and ready for your closing.

There are other steps you can take, too, to make sure your end-of-May closing goes smoothly and they all amount to “preparedness”.

When you’re asked for paperwork, provide it quickly. When you’re asked to sign a document, sign it on the same day. When you’re needed to attend a home inspection or an appraisal, do it during your first available opening.

Just leave as little as possible to the “last minute”, and everything should go well.

Mortgage Guidelines Resume Tightening Nationwide

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16 days
by in Mortgage Guidelines

Senior Loan Officer SurveyDespite an improving U.S. economy, the nation’s banks remain cautious about what they will lend, and to whom.

Last quarter, by a margin of 3-to-2, more banks tightened residential mortgage lending standards for “prime borrowers” than did loosen them.

A “prime borrower” is defined as one with a well-documented credit history, high credit scores, and a low debt-to-income ratio. The insight comes from the Federal Reserve’s quarterly survey of its member banks.

Last quarter, of the 54 responding banks :

  • 0 banks tightened mortgage guidelines considerably
  • 3 banks tightened mortgage guidelines somewhat
  • 49 banks left guidelines basically unchanged
  • 2 banks eased mortgage guidelines somewhat
  • 0 banks eased mortgage guidelines considerably

By contrast, in the quarter prior, not a single surveyed bank reported tighter residential mortgage guidelines. The period from January-March was a step backwards, therefore, for the fledgling U.S. housing market.

Overall, getting approved for a mortgage is tougher than it used to be. Banks enforce higher minimum credit score standards; ask for larger downpayment/equity positions; and require higher monthly income relative to monthly debt obligations.

It’s one reason why the homeownership rate is at its lowest point since 1997.

Another reason why homeownership rates may be down is that prospective home buyers believe the hurdles of today’s mortgage approval process may be impassably high. That’s untrue.

There are many U.S. homeowners and renters — even here in Charlotte — that were approved for a home loan last quarter — prime borrowers or otherwise. Some had excellent credit, some had modest credit. Some had high income, some had moderate income. Many, however, took advantage of low-downpayment mortgage options such as the FHA’s 3.5% downpayment program, and the VA’s 100% mortgage program for military veterans.

Despite a general tightening in mortgage standards, loans are still available and banks remain eager to lend.

It is harder to get approved today as compared to 5 years ago, but for those that try and succeed, the reward is access to the lowest mortgage rates in a lifetime. Mortgage rates throughout Carolinas continue to push home affordability to all-time highs.

If you’re in the market to buy a new a home or refinance one, your timing is excellent.

The Fed Starts A 2-Day Meeting Today. Make A Strategy.

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23 days
by in Mortgage Rates

Fed Funds Rate vs Mortgage Rates 1990-2012

The Federal Open Market Committee begins a 2-day meeting today in the nation’s capitol. It’s the group’s third of 8 scheduled meetings this year. Mortgage rates are expected to change upon the Fed’s adjournment.

Led by Chairman Ben Bernanke, the FOMC is a 12-person, Federal Reserve sub-committee. The FOMC is the group within the Fed which votes on U.S. monetary policy. “Making monetary policy” can mean a lot of things, and the action for which the FOMC is most well-known is its setting of the Fed Funds Funds.

The Fed Funds Rate is the overnight interest rate at which banks borrow money from each other. It’s one of many interest rates set by the Fed.

However, one series of interest rates not set by the Fed is mortgage rates. Instead, mortgage rates are based on the prices of mortgage-backed bonds and bonds are bought and sold on Wall Street.

There is little historical correlation between the Fed Funds Rate and the common, 30-year fixed rate mortgage rate.

As the chart at top shows, since 1990, the Fed Funds Rate and the 30-year fixed rate mortgage rate have followed different paths. Sometimes, they’ve moved in the same direction. Sometimes, they’ve moved in opposite directions.

They’ve been separated by as much as 5.29 percent at times, and have been as near to each other as 0.52 percent.

Today, that spread is roughly 3.65 percent. It’s expected to change beginning 12:30 PM ET Wednesday. That’s when the FOMC will adjourn from its meeting and release its public statement to the markets.

The FOMC is expected to announce no change in the Fed Funds Rate, holding the benchmark rate within in its current target range of 0.000-0.250%. However, how mortgage rates in and around Charlotte respond will depend on the verbiage of the FOMC statement.

In general, if the Fed acknowledges that the U.S. economy as in expansion; growing from job growth and consumer spending, mortgage rates are expected to rise. If the Fed shows concern about domestic and global economic growth, mortgage rates are expected to fall.

Any time that mortgage markets are expected to move, a safe play is to stop shopping your rate and start locking it. Today may be one of those times.

Single-Family Housing Starts Slip 0.2% In March

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29 days
by in Housing Analysis

Housing Starts Tuesday, the government released its March 2012 New Residential Construction report.

The report is made up of three sections, each related to a phase of the “new home” market. The report’s first part is Building Permits; the second is Housing Starts; the third is Housing Completions.

Of the three sections, it’s Housing Starts that gets the most attention from the press — mostly because, of the triad, it’s the simplest for a layperson to understand. However, the manner in which Housing Starts data is reported can be misleading.

Today’s newspapers offer up an excellent example.

According to the Census Bureau, total Housing Starts fell by 6% in March as compared to the month prior. 654,000 units were started on a seasonally-adjusted annualized basis.

For Housing Starts, it’s the lowest reading in 5 months, a statistic suggesting that the housing market may have lost some momentum. Much of the press covered the story from a “housing is slowing” angle.

A few published headlines include :

Although these headlines are accurate, they tell just half of the story.

Housing Starts did drop in March, but if we remove a subset of the data — structures with “5 or more units”; a grouping that includes condominiums and apartment buildings — we’re left with Housing Starts for single-family residences only. It’s this data that matters most to buyers in Charlotte and nationwide.

Few home buyers buy entire apartment buildings. Most buy single-family homes.

In March, single-family Housing Starts were down 0.2% from the month prior, or just 1,000 units on a seasonally-adjusted, annualized basis.

That’s hardly a drop at all.

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